Antitrust Division Annual Report

101 Pages·2000·2.03 MB·English

A D
NTITRUST IVISION
U S D J
NITED TATES EPARTMENT OF USTICE
A R
NNUAL EPORT
FY 1999
Contents
Foreword 1
5
The Criminal Enforcement Program
9
The Merger Enforcement Program
13
The Civil Non-Merger Enforcement Program
17
The Telecommunications Competition Program
C
o
n
21 t
International Antitrust Policies and Procedures e
n
t
s
25
Appendix A: Selected Criminal Cases
iii
41
Appendix B: Merger Challenges
87
Appendix C: Civil Non-Merger Cases
99
Appendix D: Antitrust Division Organization Directory
Antitrust Division Annual Report
Foreword
March 20, 2000
By Assistant Attorney General Joel I. Klein
I am pleased to present this Report This is the kind of antitrust enforcement
summarizing the recent major activi- policy to which this Administration is
ties of the Antitrust Division of the committed. It is both principled and
Department of Justice. As the Report pragmatic. There is no presumption that
documents, this has been an active “big” is “bad,” but neither is there an
assumption that the market will always
period for the Antitrust Division across
“correct” anticompetitive problems.
the full-range of its enforcement respon-
Instead, the Antitrust Division pays
sibilities: criminal prosecutions, merger
careful attention to facts, informed by
review, and civil non-merger activities.
economic analysis, in making its
Our accomplishments range from
enforcement decisions.
prosecutions of international cartels that F
o
have resulted in greater fines than ever r
e
before to successful challenges to “magna carta” of the free enterprise w
multibillion dollar mergers, not to system. The antitrust laws are thus used o
r
mention challenges to exclusionary to deter and punish anticompetitive d
behavior in technologically critical conduct and to obtain prospective relief
1
industries. to prevent such conduct in the future.
Antitrust plays an important role in At the same time, caution must be
our economy. Competition is the corner- taken to assure that the antitrust laws
stone of this country’s economic founda- are not misused to protect competitors
tion. We have long extolled the virtues from the vigor of the competitive
of the free market, which provides process. In a free market system, innova-
business with the opportunity to inno- tion and creativity should be rewarded,
vate, produce, and distribute goods and not penalized. There will inevitably be
services without direct intervention by winners and losers in this battle, but
the government. Competition, rather while the antitrust laws are intended to
than government directives, determines prevent conduct that impairs the com-
which businesses will succeed, and petitive process, the antitrust agencies
consumers are the ultimate—and appro- are not in the business of picking who
priate—beneficiaries of the competitive should win and who should lose. That
process. responsibility falls to consumers, who
make that determination through their
The antitrust laws ensure that the purchasing decisions.
benefits of the competitive process are
not interdicted by private anticompeti- This is the kind of antitrust enforce-
tive conduct. The Supreme Court has ment policy to which this Administra-
described the Sherman Act as the tion is committed. It is both principled
Antitrust Division Annual Report
The increasing globalization of economic behavior presents important challenges to
antitrust regimes that have traditionally been administered by individual sovereign
nations.
Globalization of Trade
International trade is of increasing
importance to the economic well-being
of United States producers and consum-
ers. U.S. firms frequently export to
foreign countries, and American con-
sumers purchase goods manufactured
abroad. Nearly 25 percent of our GDP
is now related to export and import
trade. The increasing globalization of
economic behavior presents important
challenges to antitrust regimes that have
traditionally been administered by
individual sovereign nations. The Anti-
d
r trust Division has taken account of the
o
w globalization of trade in important ways.
e
r
o
First, the Antitrust Division is
F
and pragmatic. There is no presumption devoting more of its resources to uncov-
2 that “big” is “bad,” but neither is there ering international cartel behavior that
an assumption that the market will has significant economic consequences
always “correct” anticompetitive prob- for American consumers. Perhaps the
lems. Instead, the Antitrust Division most widely publicized example during
pays careful attention to facts, informed the past year was the successful prosecu-
by economic analysis, in making its tion of companies and individuals
enforcement decisions. involved in vitamin production, which
culminated in fines of over $875 million
Despite the diversity of our enforce- for companies and in significant jail
ment targets—ranging from hard-core time for individuals. More of our crimi-
criminal violations to exclusionary nal investigations involve foreign com-
practices by dominant producers and panies than ever before. To detect and
service providers—we have observed prosecute international cartels, the
certain important trends that cut cross Antitrust Division has developed pro-
the full range of competitive activity: grams that encourage cooperation by
globalization of trade, rapid technologi- foreign companies and their employees,
cal change, and deregulation. Each of including various forms of cooperation
these trends has important implications agreements with other governments.
for the future of antitrust enforcement.
Antitrust Division Annual Report
Another important focus of the Department’s antitrust enforcement efforts over the past
few years has been our continuing effort to eliminate both private and public restrictions
on competition in industries traditionally regulated as franchise monopolies.
So, too, the Antitrust Division has
recognized the international dimension
of merger activity. An increasing number
of transactions have competitive implica-
tions in more than one country, and
today it is not uncommon for a transac-
tion to be subject to multicountry
review. The Antitrust Division has
endeavored to develop good working
relationships with other countries and
the European Union. We are working
closely with governments around the
world to cooperate in merger review,
both to minimize burdens on private
parties and to advance the cause of
F
proper antitrust analysis. To advance this o
r
process, the Attorney General estab- e
w
lished the International Competition
work externalities and first-mover o
Policy Advisory Committee, which r
advantages, which pose risks that mar- d
recently issued its report reviewing
kets will “tip” very quickly toward a
international antitrust issues and making 3
dominant supplier and thereby make
recommendations for consideration.
entry extremely difficult. The more
important that innovation becomes to
Technological Change
society, the more important it is to
A number of our most important preserve economic incentives to inno-
industries have been characterized vate. In such circumstances, timely and
recently by unprecedented levels of effective antitrust enforcement may be
technological change. Such change has the key to preserving an environment in
important implications for antitrust which companies—whether new or old,
enforcement. On the one hand, such large or small—believe that there will be
change creates opportunities for compa- no artificial barriers to bringing new
nies to develop new products and products and services to market.
services and find rapid customer accep-
tance. It has been argued that the pros- It is undoubtedly true that rapid
pect for such change reduces the need technological change requires careful
for antitrust enforcement because a attention to facts. Our challenges to the
company that dominates an industry Lockheed Martin-Northrop Grumman
today may be replaced tomorrow by a transaction and Microsoft’s monopoly of
company that suddenly offers a superior computer operating systems are not
product or service. However, rapid garden-variety antitrust actions. They
technological change may actually and other challenges filed by the Anti-
increase barriers to entry through net- trust Division were undertaken only
Antitrust Division Annual Report
The past decade has witnessed remarkable progress in moving these industries from a
regime based largely on regulated monopoly to one that encourages competition
wherever possible, a trend portending an increasingly important role for antitrust.
after careful consideration of both The United States has again become
historical conduct and likely future the dominant economy of the world.
effects. The fact that antitrust analysis of The fact that this reemergence has
issues arising in high-technology indus- coincided with a substitution of compe-
tries may be difficult is no basis for tition for regulation and a reinvigorated
abandoning the effort altogether. En- antitrust enforcement policy is not a
forcement decisions that are made today, coincidence. Michael Porter noted in his
especially in industries characterized by landmark work The Competitive Advan-
rapid technological change, will have tage of Nations (at pp. 662-63) that
important ramifications for the nature of domestic firms spared from competing
the American economy for many years at home are unlikely to succeed abroad.
to come. He also found that the importance of
domestic rivalry has “strong implications
d Deregulation for antitrust policy…. A strong antitrust
r policy, especially in the area of horizon-
o
w In recent decades, legislative and tal mergers, alliances, and collusive
e regulatory changes in the United States
behavior, is essential to the rate of
r
o have reversed a generation of pervasive
upgrading in an economy.” We could
F
government regulation and deregulated
not agree more.
such basic industries as telecommunica-
4
tions, energy, financial services, and
I hope you will find the attached
transportation. Competition, with
report informative. This is the first
appropriate reliance upon antitrust laws,
Annual Report published by the Anti-
has again become the norm.
trust Division in over three years. As a
result, the discussion of our enforcement
The Antitrust Division continues to
programs includes references to certain
work with various agencies to find ways
matters begun before fiscal 1999 that
to replace regulatory constraints with
carried over into that year, and the
competitive incentives. We have been
appendices contain information about
very active in promoting competition
cases filed subsequent to publication of
pursuant to the Telecommunications Act
our last annual report.
of 1996, both to the Federal Communi-
cations Commission and in the courts.
Our recent accomplishments are
The Antitrust Division is the primary
testimony to the hard-working men and
advocate of competition within the
women of the Antitrust Division and
executive branch and works regularly
the bipartisan support that antitrust
with Congress, urging that the market-
enforcement has enjoyed. Both are
place—through purchase decisions made
critical to the health and future of the
by consumers—rather than government
American economy.
agencies determine the products and
services that businesses will provide.
Antitrust Division Annual Report
The Criminal Enforcement Program
T
h
e

C
The Antitrust Division institutes The Antitrust Division recently has r
i
criminal enforcement of Section prosecuted international cartels m
operating in a broad spectrum of i
One of the Sherman Act, 15 U.S.C. n
commerce, including vitamins, food and a
Section 1, against hardcore cartel activ- l
feed additives, chemicals, graphite E
ity such as price-fixing, bid-rigging, and
electrodes (used in steel making), and n
market-allocation agreements. Such f
marine construction and transportation o
conduct causes substantial harm to r
services. c
purchasers of goods and services. e
m
e
The prosecution of such domestic additives, chemicals, graphite electrodes n
cartel activity has been at the heart of (used in steel making), and marine t
P
the Department of Justice’s antitrust construction and transportation services. r
o
enforcement efforts ever since the Since the beginning of FY 1997, the g
enactment of the Sherman Act in 1890 Antitrust Division has prosecuted ar
and continues unabated. In the last international cartels affecting over $10 m
several years, however, the Antitrust billion in U.S. commerce. The cartel
5
Division has made the prosecution of activity in these cases cost U.S. busi-
international cartels that victimize nesses and consumers many hundreds of
American businesses and consumers one million of dollars annually.
of its highest priorities. This strategy
recognizes that in many instances inter- The Antitrust Division’s strategy of
national cartels pose an even greater concentrating its criminal resources on
threat to American businesses and international cartels has led to unprec-
consumers than do domestic conspira- edented success in terms of cracking
cies because they tend to be highly those cartels, securing the conviction of
sophisticated and extremely broad in the major conspirators, and obtaining
their impact—in terms of geographic record-breaking fines.
scope, the amount of commerce af-
fected, and the number of businesses Since the beginning of FY 1997, the
and consumers victimized by the con- Antitrust Division has obtained over
spiracy. $1.5 billion dollars in criminal fines,
well over 90 percent of which were
The Antitrust Division recently has imposed in connection with the prosecu-
prosecuted international cartels operat- tion of international cartel activity. To
ing in a broad spectrum of commerce, put this fine figure into perspective,
including vitamins, food and feed consider that the highest amount of
Antitrust Division Annual Report
fines obtained by the Antitrust Division the amount of harm caused to American
in any given year prior to FY 1997 was businesses and consumers, than any
roughly $42 million. In FY 1997, the conspiracies previously encountered by
Antitrust Division shattered that mark the Antitrust Division.
when it collected $205 million in crimi-
nal fines—nearly 500 percent higher For example, the international
m than during any previous year in the vitamin cartel, which affected over $5
a Antitrust Division’s history. In billion in U.S. commerce, was the most
r
g FY 1998, the Antitrust Division topped harmful and elaborate conspiracy ever
o
r that number when it obtained over $265 uncovered by the Antitrust Division.
P
million in criminal fines. And then, in The members of the vitamin cartel
t
n FY 1999, the Antitrust Division thrust reached agreements on everything from
e
m the new record still another 400 percent how much product each company would
e higher when it secured over $1.1 billion produce, to how much they would
c
r in criminal fines. The amount of fines charge, to which customers they would
o
f obtained since FY 1997 is many mul- sell. The victims who purchased directly
n
E tiples higher than the sum total of all from the cartel members included
l criminal fines imposed for violations of companies with household names such
a
n the Sherman Antitrust Act dating back as General Mills, Kellogg, Coca-Cola,
i
m to the Act’s inception in 1890. Tyson Foods, and Proctor & Gamble.
ri However, these companies were just the
C
The dramatic increase in fines first to feel the effects of this conspiracy.

e
reflects the fact that the major interna- In the end, for nearly a decade, every
h
T tional cartels prosecuted over the past American consumer—anyone who took
few years have been bigger, in terms of a vitamin, drank a glass of milk, or had
6
the volumes of affected commerce and a bowl of cereal—ended up paying more
Antitrust Division Criminal Fines
$1,200
Fine Amounts $1,100
$1,000
)
1990: $23,575,000 s
n
o $900
1991: $20,379,000 milli $800
1992: $23,705,000 n
1993: $42,296,000 s (i $700
e
1994: $40,236,000 n $600
Fi
1995: $41,653,000 al $500
n
1996: $26,817,000 mi
$400
ri
1997: $205,178,000 C
$300
1998: $266,924,000
$200
1999: $1,105,654,316
$100
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Antitrust Division Annual Report
Sherman Act Violations Yielding a Fine of $10 Million or More
Defendant (Fiscal Year) Product Fine Geographic Country
(million) Scope
F. Hoffman-La Roche Ltd. (1999) Vitamins $500 International Switzerland
BASF AG (1999) Vitamins $225 International Germany
SGL Carbon AG (1999) Graphite Electrodes $135 International Germany
T
UCAR International, Inc. (1998) Graphite Electrodes $110 International United States h
e
Archer Daniels Midland Co. (1997) Lysine & Citric Acid $100 International United States
C
Takeda Chemical Industries, Ltd. Vitamins $72 International Japan r
i
m
(1999)
i
n
Haarmann & Reimer Corp. (1997) Citric Acid $50 International German Parent
a
l
HeereMac v.o.f. (1998) Marine Construction $49 International Netherlands
E
Eisai Co., Ltd. (1999) Vitamins $40 International Japan n
f
o
Hoechst AG (1999) Sorbates $36 International Germany
r
c
Showa Denko Carbon, Inc. (1998) Graphite Electrodes $32.5 International Japan e
m
Daiichi Pharmaceutical Co., Ltd. Vitamins $25 International Japan
e
(1999) n
t
Nippon Gohsei (1999) Sorbates $21 International Japan
P
r
Pfizer Inc. (1999) Maltol/Sodium $20 International United States o
Erythorbate g
r
Fujisawa Pharmaceuticals Co. a
m
(1998) Sodium Gluconate $20 International Japan
Dockwise N.V. (1998) Marine Transportation $15 International Belgium 7
Dyno Nobel (1996) Explosives $15 Domestic Norwegian Parent
F. Hoffmann-LaRoche, Ltd. (1997) Citric Acid $14 International Switzerland
Eastman Chemical Co. (1998) Sorbates $11 International United States
Jungbunzlauer International (1997) Citric Acid $11 International Switzerland
Lonza AG (1998) Vitamins $10.5 International Switzerland
Akzo Nobel Chemicals, BV &
Glucona, BV (1997) Sodium Gluconate $9 International Netherlands
ICI Explosives (1996) Explosives $10 Domestic British Parent
Mrs. Baird’s Bakeries (1996) Bread $10 Domestic United States
Ajinomoto (1996) Lysine $10 International Japan
Kyowa Hakko Kogyo, Co., Ltd.
(1996) Lysine $10 International Japan
so that the conspirators could reap Swiss, German, Canadian, and Japanese
hundreds of millions of dollars in addi- firms and over $875 million in criminal
tional revenues. fines against the corporate defendants,
including a $500 million fine imposed
To date, the vitamin investigation on F. Hoffmann-La Roche Ltd. (HLR)
has resulted in convictions against and a $225 million fine imposed on
Antitrust Division Annual Report
BASF AG. The $500 million fine the United States is committed to
imposed against HLR is the largest fine vigorous antitrust enforcement against
ever imposed in any Department of international cartel activity.
Justice proceeding under any statute.
The Antitrust Division also has thus far The increased effectiveness of the
prosecuted seven American and foreign Antitrust Division’s anticartel efforts
m executives who participated in the result from more effective investigation
a vitamin cartel. All of these individuals, as well as good trial work. The Antitrust
r
g including the foreign defendants, are Division’s Amnesty Program has been a
o
r either already serving time in federal major contributor to its investigative
P
prison or are awaiting sentencing and success. In August 1993, the Antitrust
t
n face potential jail sentences as well as Division expanded its Amnesty Program
e
m heavy fines. For example, Kuno to make it easier and more attractive for
e Sommer, the former director of World- companies to come forward and cooper-
c
r wide Marketing for Vitamins at HLR, ate with the Antitrust Division in
o
f and Roland Brönnimann, the former exchange for a complete pass on pros-
n
E president of the Fine Chemical and ecution. Today, that program is the
l Vitamin Division at HLR, were recently Antitrust Division’s most effective
a
n sent to prison and ordered to pay sub- generator of large cases, and it is the
i
m stantial fines for their roles in the vita- Department of Justice’s most successful
ri min cartel. Messrs. Sommer and leniency program. During the past year,
C
Brönnimann are the first European the Antitrust Division has been receiv-

e
nationals to serve time in a U.S. prison ing amnesty applications at the rate of
h
T for engaging in cartel activity. The approximately two per month—a more
imposition of jail sentences against than twenty-fold increase compared to
8
foreign nationals residing outside this the prior Amnesty Program. Moreover,
country, together with the unprec- in the past year alone, the Amnesty
edented fines obtained in this matter, Program has led to dozens of convic-
sends a powerful deterrent message that tions and over $1 billion in criminal
fines.
Antitrust Division Annual Report